CEO SUMMARY: There was an interesting consensus that emerged from the 80 sessions and 118 speakers at this year’s Executive War College in New Orleans earlier this month. The consensus centered around two themes. One theme is disruption, which is bad news for those labs that hope to maintain the status quo. The other theme is opportunity, which is good news for those labs willing to realign their lab test services to better meet the evolving needs of physicians, payers, and patients.
SOMETHING SPECIAL AND UNIQUE happened earlier this month at the year’s Executive War College on Lab and Pathology Management. It was the first time in 24 years of this conference that every keynote speaker at every general session was in full agreement about the most powerful trends in healthcare and the clinical laboratory.
This unprecedented development is itself significant. It is a rare consensus on the direction of healthcare and the changes unfolding daily within the clinical laboratory marketplace. This consensus has at least three valuable benefits to clinical lab administrators and pathologists everywhere.
First, the themes, trends, and predictions of these keynote speakers provide all lab leaders with a useful understanding of today’s healthcare system and how it will look different in coming years. It provides them with a strategic road map, endorsed by the keen insights of these nationally-recognized speakers.
Second, lab leaders who incorporate the insights and recommendations of these speakers into the clinical, operational, and financial strategies of their clinical labs and pathology groups can have confidence that they are positioning their labs for success.
Third, in attendance this year was a record crowd of just under 900 attendees from nine different countries. As they listened to the general session speakers over the two days of the conference, there was uncommon unanimity as to the accuracy of the speakers’ insights and the validity of their predictions about what’s driving healthcare and laboratory medicine in the United States today.
Stated differently, there were few in the audience who voiced strong disagreement with the trends, the pace of change expected, and the most appropriate strategies labs can employ to deliver cutting-edge lab testing services in a financially-sustainable manner.
This year’s opening general session kicked off with a presentation by Robert L. Michel, Editor-In-Chief of The Dark Report and organizer of the conference. His very first slide set the tone for the keynote speakers that followed. It was a highway sign that read “Disruption Ahead!”
“My strongest message to lab leaders today is that disruption is happening across the full spectrum of healthcare in this country,” declared Michel. “The best proof that this statement is true is to compare any sector or activity in healthcare today with how it looked just five years ago. The differences are undeniable.
“Consider the integration of care delivery as one trend,” he said. “We regularly read headlines about how health system A is acquiring or merging with health system B. Examples of this trend include Aurora Health and Advocate Health forming an $11-billion organization, along with the pending merger of Dignity Health and Catholic Health Initiatives to create a huge health system operating 142 hospitals in 21 states!
Farewell to Fee-for-Service
“Next, let’s look at disruption in provider reimbursement caused by the move away from fee-for-service (FFS) payment,” continued Michel. “This is an established fact. Change Health published data that shows how, in 2018, the proportion of business aligned with fee-for-service was just 37.2%. It predicts that FFS will fall to 25.4% by 2021, just 24 months away!
“If by 2021, 75% of payments made to hospitals, physicians, and other providers are in the form of value-based and per-member-per-month arrangements, then it is reasonable to predict that private payers will be shifting a larger proportion of lab payments away from fee-for-service as we go forward,” he noted. “All the signs in today’s marketplace point to disruption in how providers are paid by payers and that includes clinical laboratories and anatomic pathology groups.”
Michel next pointed out the disruption occurring in the actual delivery of healthcare. “It is easy to recognize the shift from what I like to describe as ‘reactive’ care to proactive care,” he noted. “Reactive care is waiting for sick patients to show up at the doctor’s office or the emergency room at the hospital. That’s yesterday’s model of healthcare in the United States.
“Today, proactive care requires providers to keep people healthy and out of the hospital,” he added. “You notice this today when you visit your primary care doctor. He or she will devote significant time in each office visit to point out your biggest risk factors in your current state of health. Then comes advice and prescriptions designed to either prevent a chronic condition or manage an existing condition so that acute (and expensive) episodes and hospitalizations can be avoided.
Change in Mix of Lab Tests
“You can also recognize this shift in how your lab’s client physicians are giving greater emphasis to preventive care by watching the changing mix of tests coming into your laboratory,” said Michel. “Compared to just a few years ago, today your physician clients order a growing proportion of lab tests for the purpose of early detection, for monitoring patients on the verge of a chronic condition (like diabetes), or managing patients with chronic conditions.
“Another fact demonstrating how healthcare is steadily moving away from reactive care and emphasizing proactive care is a statistic published in MedPac’s current “Report to Congress: Medicare Payment Policy, March 2019,” he stated. “Over the 11 years between 2007 and 2017, the number of Medicare inpatient discharges declined by a cumulative 20%. During those same years, Medicare outpatient visits increased by a cumulative 43.5%.
“This is an essential insight that should not be overlooked by lab administrators and pathologists,” continued Michel. “Medicare data demonstrate that the nation’s physicians and hospitals are getting better at keeping people out of hospitals and they have sustained that trend for 11 years. Every laboratory should consider this fact in its strategic planning and identify ways to support this ongoing transition in the healthcare system.”
Michel next discussed the disruptive trends in the clinical laboratory and anatomic pathology markets. “Without question, the single most disruptive factor now active in the clinical lab industry are the Protecting Access to Medicare Act (PAMA) price cuts to the Medicare Clinical Laboratory Fee Schedule,” he observed.
“Everyone knows that the PAMA law allows the federal Centers for Medicare and Medicaid Services (CMS) to cut lab prices by 10% each year in 2018, 2019, and 2020. CMS can then cut lab test prices by a maximum of 15% each year in 2021, 2022, and 2023.
“These Medicare price cuts are disruptive in multiple ways,” he added. “First, labs are getting paid less for their Medicare Part B lab test claims. Second, many state Medicaid programs moved swiftly to drop their lab test prices in response to the Medicare program. Third, labs report that most private payers want to cut what they pay for lab tests in lock-step with the Medicare price cuts.
Will Lab Test Quality Erode?
“Collectively, this is a major disruption to the revenue labs need to maintain quality lab testing services,” noted Michel. “Since 2018, our intelligence service, The Dark Report, has regularly identified community and independent labs that have sold or gone out of business due to the loss of revenue just from the Medicare Part B price cuts.
“Thus, the disruption to the clinical laboratory industry will go far beyond what Congress intended when it passed the Protecting Access to Medicare Act in 2014 and will certainly be more extensive than what CMS and the General Accountability Office expected,” observed Michel. “Labs are disappearing from many smaller communities and rural areas, thus reducing patient access to quality, local lab testing.
“The second primary source of disruption to labs involves regulatory and compliance requirements,” he said. “Between the actions of federal agencies and rulings in federal court cases, labs today face a different and tougher regulatory environment.
“The EKRA section of the Support Act that became law last October has language making it illegal to pay commissions for physician referrals,” noted Michel. “This language conflicts with the language in the federal anti-kickback statute. That leaves labs waiting for guidance and clarity from the federal government.
“Then there are the new NCCI guidelines that address lab test bundling and took effect on Jan. 1,” he added. “Lab consultants quickly pointed out that the guidelines are confusing, particularly for labs performing molecular and genetic tests.
In his closing remarks, Michel told the Executive War College audience that, despite these disruptive trends, there was good news for the clinical labs and pathology groups. “That good news is there is opportunity for labs of all sizes and types,” he explained. “Labs should recognize the changing needs of hospitals, physicians, payers, physicians and employers, then develop services that add value.
“Labs can be paid for this value, thus creating new sources of revenue. Speakers at this conference will be sharing their successes with getting paid for their new, added value services. This is happening today, in many areas of the United States,” concluded Michel.
Keynote Speakers Identify Opportunities for Labs, Discuss Disruptive Healthcare Trends
THERE WAS MUCH GENERAL AGREEMENT about basic trends in healthcare and the clinical laboratory industry among the keynote speakers at this year’s Executive War College.
During the opening general session on Tuesday, April 30, following Robert Michel’s opening address, attendees heard from these three speakers:
- Rick L. Panning, MBA, MLS (ASCP) CM, Senior Administrative Director, Laboratory Services, HealthPartners, Bloomington, Minn.
- Sonny Varadan, MBA, PMP, Chief Information Officer, Sonora Quest Laboratories, Phoenix, Ariz.
- Philip Chen, MD, PhD, Chief Strategy Officer, Sonic Healthcare USA, Austin, Texas
Effective Lab Strategies
The emphasis during this general session was the strategic thinking and innovations that these three lab organizations were using to deliver added value to their stakeholders. In the case of the laboratory at HealthPartners, Rick Panning described how and why his lab organiztion was moving certain tests out of the core lab and into physicians’ offices.
The objective was to shorten the time to diagnosis and selection of therapy while the patient was still in the office. Not only does this reduce the overall cost of care, but it makes the doctors at HealthPartners more productive.
Following this presentation, Sonny Varadan and Philip Chen, MD, PhD, each spoke about the projects within their respective labs to combine lab test data with additional data, such as from EHRs and demographic and geographical data. Both clinical laboratories have collaborations with payers, accountable care organizations (ACOs), and similar provider groups where they deliver real-time, actionable clinical intelligence and are paid in separate revenue streams for this information.
Tuesday’s closing general session featured Lâle White, Executive Chairman and Chief Executive Officer, XIFIN, Inc., of San Diego.
Important Healthcare Trends
On Wednesday, May 1, the general session featured presentations by:
- Ted Schwab, MBA, Strategist and Entrepreneur, Babylon Health, Austin, Texas.
- Mark D. Dixon, R.Ph., MHA, FACHE, President, The Mark Dixon Group, LLC, Edina, Minn.
Ted Schwab, a nationally-recognized healthcare strategist, surprised the audience with an incisive overview of how rapidly and radically some transformation was happening in healthcare. His description of how major health insurance companies were diversifying, for example, had the crowd’s full attention.
Mark Dixon was next to the podium. As a former hospital CEO, he actively works with hospital and health network CEOs. He helped attendees understand the most pressing concerns of hospital CEOs. He also identified ways that labs and pathology groups can contribute to solving those same concerns at their own hospitals.
Most of the powerpoints used by these speakers are available to clients of THE DARK REPORT when they access: https://www.executivewarcollege.com/presentations. Audio recordings of these and other presentations can be obtained by contacting the offices of THE DARK REPORT.